Kosik v Chief Executive, Department of Natural Resources

[1997] QLC 64

[1997] QLC 64

 

LAND COURT, BRISBANE 12 May 1997

Re:Determination of Unimproved Value - Gold Coast City Council (Albert Division) - (V95-451).

B and RM Kosik v.

Chief Executive, Department of Natural Resources (formerly Department of Lands)

D E C I S I O N

This appeal lies against the determination by the Chief Executive of an unimproved value of $137,500 for a 48.36 hectare parcel of land described as Lot 313 on Plan W312356, Parish of Boyd. The land has been valued by the respondent Chief Executive as a large rural residential homesite. As at the relevant date for the valuation (viz. 1 January 1995), Lot 313 was zoned "Rural C" under the Albert Shire Council Town Planning Scheme which was gazetted on 19 March 1988. Under the 1988 Strategic Plan for the Albert Shire, the land has been classified into predominantly "Rural Residential" as to its preferred future dominant land use. The land is zoned "Rural" under the current Albert Shire Council Town Planning Scheme which was gazetted shortly after the relevant date for valuation on 24 February 1995. Under the 1995 Shire Council Plan, Albert Corridor, Development Control Plan No 5, Lot 313 has been classified into a preferred dominant land use of "Open Space".

Lot 313 is situated off Dunns Road, Wolffdene, approximately 11 km south-west of Beenleigh Central Business District.  The appellants contend within the notice of appeal for an unimproved value of $58,500.

There is another appeal before the Court against the determination of the unimproved value of the same parcel of land as at the earlier relevant date of 30 June 1993 (Ref V95-275). That case was heard separately and I am delivering separate decisions, but the Court records are integrated. It is best if the decisions are read together.

George John Crane, who is a practising registered valuer in the Beenleigh District, conducted the case for the appellants and also furnished evidence in the matter. He called Bohuslav Kosik to give evidence in support of the grounds of appeal which read:

"1.        This land is used exclusively for the business of primary production and therefore should receive the benefit of concessional valuation.

2.This land has no legal access.

3.Is land revalued with interim valuation each year?

4.If so, only CPI rates should be used.  Especially since general market value of real estate has fallen dramatically."

Mr Kosik outlined the history of the ownership of the subject land which the appellants purchased in 1990 for $78,000. Mr Kosik told us that the land was purchased to engage in the business of breeding and fattening cattle. At the time of their purchase, the appellants thought there was legal access to the land via a registered easement off Dunns Road but this was a mistaken belief, and in fact the land had, and still has, no legal access. Vehicular access has been provided through adjacent lands in the ownership of the appellants. (For further evidence in respect of the lack of legal access and the existing access, vide decision in V95-275).

The appellants have since purchased the adjoining Lot 2 on RP 129052 containing an area of 133.076 hectares in 1994 and also the adjoining Lot 299 on Plan W312542 containing 7.598 hectares in early 1985 for $33,000 (for their reasons for purchasing Lot 299, vide decision in V95- 275).

Mr Kosik told us that the appellants work all three parcels together for what he says is a single business for the purpose of grazing. While at the relevant date of valuation of the subject land (1 January 1995) the business was not viable, it is Mr Kosik's intention to eventually make the enterprise profitable.

Mr Kosik informed the Court that at the moment, 30 head of cattle graze Lot 313 but the numbers vary with cattle grazing rotation. He hopes to further improve the property and eventually run 60 to 70 head of cattle upon it. At the moment, the appellants run about 50 head of cattle on the adjoining Lot 2 in two paddocks, and there are two additional paddocks (about two- thirds of the area of Lot 2) which is leased to the original owner (JM Hart) and upon which the Harts run something like 60 to 80 head of cattle. Mr Kosik believes the potential carrying capacity of the three parcels to be "anything up to 200 head" and he hopes that this potential will be achieved in the future.

Mr Kosik explained that he holds a certificate of registration for sales tax, and a registered horse and cattle brand.

Mr Kosik detailed the improvements carried out on the subject land since purchase. He has cleared the scrub patches, improved pastures and planted grasses. He has built dams for cattle

and a cattle yard. He has fenced the property and subdivided it into four paddocks.  Mr Kosik told us that he works on the subject and adjoining lands for four to five days per week. He has constructed access to the land. His grazing activities have been hampered by a drought which finished last year. The activities have also suffered from hardship from bush fires which originate in an adjoining forestry reserve.

Mr Kosik did not present any costs of carrying out of the improvements on the subject land. He did supply a schedule showing the cost of equipment purchased since 1991 in the sum of

$121,200. Some of this equipment has by now been sold. In 1991, ten head of cattle were purchased for $1800 and in 1995, 15 head for $3,900. Although there is no evidence on the point, the capital cost of the machinery purchased does seem large for the existing and/or potential cattle grazing business when the carrying capacity of both the subject land and the balance of the aggregation is considered. But nothing really turns on this.

The appellants have not received any return from the grazing enterprise to date in terms of cash flow. They spend more than are the returns. They are concentrating on building up the herd instead of selling cattle. Mr Kosik agrees that running a herd of 70 head of cattle could not be regarded as a good cattle grazing proposition but confirms that he is building up the herd aiming at the target of 200 head of cattle potential.

Mr Kosik told us that although a formal leasing agreement is now in place for the two-thirds of Lot 2 with Mr Hart, in reality Mr Hart has been renting the paddock since 1994 and the appellants have been receiving a rent of $600 per month (or $7,200 per annum) since that time.

Mr Kosik produced in evidence the appellants' tax return from their grazing business for the financial year ending 30 June 1996. It shows that during that year, six head of cattle were sold, the natural increase was 13 head and that 31 head were on hand as at 30 June 1996. Gross profit from cattle trading was $3,411 with total gross income from primary production $6,911. Taxable deductions totalled $45,248 and there was a taxable loss of $38,337. I note that the deduction for depreciation was $35,194 and this seems to be an extraordinarily large sum given the nature of the primary production business. No taxation returns were provided by them for the financial years ending 30 June 1994 or 30 June 1995.

Mr Crane submitted a formal valuation document. He has valued the subject land on the basis of it qualifying to be valued under the provisions of s.17(1) of the Valuation of Land Act 1944 as being land used for the purpose of farming in the sum of $61,000. In the event that the Court finds that the subject land does not qualify to be so valued, then he values the land (on the basis of its value as "extra land" to adjoining lands due to lack of legal access) in the sum of $65,000.

Mr Crane's description of the type of country, the improvements, and the carrying capacity of Lot 313 are outlined in the decision in V95-275.

Mr Crane told us in evidence that the principal basis for his valuation of the subject land as farming land was the decision of the Land Court in Re: KW Whackett v. Chief Executive, Department of Lands (AV93-163) and in Re: KW and MR Whackett v. Chief Executive, Department of Lands (AV93-164). The Land Court determined the value of the Whackett land in the sums of $60,000 (AV93-163) and $56,000 (AV93-164). I note from tendered records that the real property description of AV93-163 land is Lot 2 on RP 47469 and that it contains an area of

54.8 hectares, and of AV93-164 land, Lot 2 on Plan 144905 and that this parcel contains an area of

51.3   hectares. The Whackett lands are situated about 15 km south of Beenleigh. Mr Crane says that in the Whackett cases, the Land Court allowed appeals against determinations by the Chief Executive in the sums of $220,000 for Appeal AV93-163 land, and the sum of $205,000 for Appeal AV93-164 land both as at a relevant date of 31 March 1992. The Land Court found that the Whackett lands should have been valued as lands used for the purpose of farming, whereas the respondent Chief Executive had valued them as rural homesites with some subdivisional potential.

Mr Crane told us that the Whackett properties considered as an aggregation are similar to the subject aggregation. They are similar in regard to steepness of topography, but the subject land is probably more lightly timbered than is the Whackett land. It is, in Mr Crane's opinion, as highly improved for grazing as is the Whackett aggregation land. Mr Crane told us that the subject aggregation also carries a similar number of cattle as does the Whackett property. He further says that the subject aggregation has a higher gross return from its grazing activity than does the Whackett property when income from the leased area is included. I note that the Land Court determination for AV93-164 land is at the rate of $1,094 per hectare, and for AV94-164 land is at the rate of $1,097 per hectare.

Mr Crane has assessed his valuation of the subject land as farming land in direct relationship with an unimproved value of $88,000 ($1,600 per hectare) applied by the Chief Executive to the KW Whackett owned Lot 2 on RP 47469 containing an area of 54.8 hectares as at a relevant date of 1 January 1995.  In evidence is an I.V.A.S. computer driven report which suggests this valuation was reduced from $242,500 due to an error (presumably in the assessment). Mr Crane was not able to help us as to the reason for the error. Nonetheless, he applied a value of $1600 per hectare to the subject land from which he deducted an allowance of $328 per hectare for the cost of providing power to the aggregation (see text of decision in V95-275) $3,000 for

telephone connection costs, and $10,000 for access roads and maintenance. This then, is the basis for Mr Crane's valuation of the subject land as farming land at the rate of $1260 per hectare.

As for his alternative valuation in the sum of $65,000, Mr Crane uses the valuation method and comparisons of value as set out in the decision in V95-275, except his comparisons are with an unimproved value of $330,000 for the Orford property (as at 1 January 1995), and with an unimproved value of $250,000 for the Maudsley property (also as at 1 January 1995). Mr Crane has not provided the Court in this case with any additional evidence as to the value of the subject land as "extra land" (for details of his comparisons and reasons vide decision in V95-275).

Departmental registered valuer Arend Boudewyn Van Hees was called in evidence. Mr Van Hees was not the valuer originally responsible for the Chief Executive's valuation under appeal. He does, however, support it as being fair and reasonable.

As for Mr Van Hees' description of the subject land, its access, etc., again refer to decision in V95-275. I should emphasize that Mr Van Hees agrees with a contention by the appellants that there is no legal access to the subject land.

As with Appeal V95-275, Mr Van Hees continues to say that the subject land does not qualify to be valued under s.17(1) of the Valuation of Land Act as land used for the purpose of farming. He says that the grazing activity on the subject land, and for that matter on the Kosik land aggregation, including income from the lease rental, at the relevant time does not have a significant and substantial commercial purpose or character, and that it is not engaged in the purpose of a profit on a continuous or repetitive basis.

Mr Van Hees does not know the Whackett properties, but information he has received leads him to believe that it carried 70 head of cattle and cattle sales in a relevant year were 25 head which grossed $5,000 per annum. He says there was no profit in the Whackett grazing enterprise and that the Whackett land had a maximum grazing sustainability of about 150 head of mixed cattle. This information leads Mr Van Hees to conclude that for both the Whackett aggregation and the subject aggregation, there is limited grazing activity.

Mr Van Hees supports a valuation of $137,500 for the subject land as a rural homesite as at the relevant date of 1 January 1995 on the basis of two sales of rural homesites. Details are:

Sale No 1-     Lot 100 on RP 842216 - 5.144 ha - O'Carrigan to Barnes on 18 March 1995 for $174,000 - Situation Lot 100 Brosnahan Court, Belivah - Zoning "Rural".

Mr Van Hees describes this parcel as being a high elevated block of land, with gentle to steep crossfall to the south-west corner, well drained with gravel road access. Mr Van Hees sees the sale land as

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having inferior views to the subject land but superior access. The sale land shows the values paid for highly elevated rural allotments within the area. Overall Mr Van Hees sees the sale lot to be inferior to the subject land. It is to be noted that the respondent Chief Executive applied a valuation of $90,000 to this sale site as at a relevant date of 1 January 1995.

Sale No 2- Lot 299 on Plan W312542, Parish of Boyd - 7.598 hectares - Maplebourne Pty Ltd to Kosik on 1 February 1995 for $33,000 - Situation Randle Road, Logan Village - Zoning "Rural".

Mr Van Hees describes this site as being a high elevated parcel of land falling steeply to the western boundary, well drained and with good rural views. As with the subject land, Mr Van Hees says that Lot 299 has no legal access. The majority of this lot if steeply undulating.

Mr Van Hees describes Lot 299 as being comparable in nature of land to the subject property but access to the sale property is regarded by him to be more difficult than to the subject land. Overall Mr Van Hees sees Lot 299 as being inferior as a rural residential block to the subject land. The respondent Chief Executive applied an unimproved value of $33,000 to Lot 299 as at a relevant date of 1 January 1995. It is to be noted that the sale of Lot 299 is to the appellants who were adjoining owners, and upon the circumstances of this sale Mr Kosik commented in evidence (vide decision in Appeal V95-275 for details).

Mr Van Hees did not go through the exercise in this case, as he did in his V95-275 valuation of the subject land, of making a specific allowance for the lack of legal access. He says that the market trends for rural homesites as between the earlier relevant date of 30 June 1993 for the V95-275 valuation, and the relevant date for this valuation (1 January 1995) indicate a 10% rise over the formerly subsisting valuation - thus a valuation of $137,500 for the land as at 1 January 1995.

I deal now with the claim that the subject land should be valued concessionally under the provisions of s.17(1) of the Valuation of Land Act as land used for the purpose of farming. But before I so do, I should point out that it is now well established that the relevant period during which farming (in this case grazing) activities carried out on land qualify it to be valued as used for the purposes of farming commence on the relevant date for the valuation (in this case 1 January 1995) and end on the date of issue of such valuation (in this case 29 May 1995).

Further, I should say that the test to be applied in determining whether activities carried out on land are such as to warrant it to be valued under s.17(1) of the Act as land used for farming are

set out in the judgment of the Land Appeal Court in Re: Thomason v. Chief Executive, Department of Lands (dated 3 March 1995 - AV93-103) - not yet reported. It is:

"1.       Is the land used for the purposes of:

(a)the business or industry of a type specified (namely, grazing, dairying, pig farming, poultry farming, viticulture, orcharding, apiculture, horticulture, aquiculture, vegetable growing, the growing of crops of any kind, forestry); or

(b)any other business or industry involving an activity of a type specified (namely, the cultivation of soils, the gathering in of crops or the rearing of livestock)?

2.Does the use of the land for the purposes of that business or industry represent the dominant use of the land?

3.Does the use of the land for the purposes of that business or industry have:

(a)a significant and substantial commercial purpose; or

(b)a significant and substantial commercial character?

4.Is the use of the land for the purposes of that business or industry engaged in for the purpose of profit on:

(a)a continuous basis; or

(b)a repetitive basis?  "

Now it is perhaps unfortunate for the appellants that more research was not made into the complete history of the Whackett appeals. Subsequent to the Land Court bringing down its decision in those matters, the then respondent Chief Executive, Department of Lands, appealed to the Land Appeal Court against the Land Court findings. The Land Appeal Court in a majority judgment, overturned the decision of the Land Court that the Whackett lands should have been given the protection of s.17(1) or s.11(9) as it then was, as it was held that the land did not qualify to be so valued. The Land Appeal Court judgment was that each of the Whackett land parcels should have been valued as a large rural residential site. The Land Appeal Court determined an unimproved value of AV93-163 land in the sum of $80,000, and the unimproved value of AV93- 164 land in the sum of $125,000.

The decisions in the Whackett case suggest that the Whackett aggregation contained an area of 105 hectares of steep rugged grazing land.  The grazing activity involved the running of

about 70 head of cattle and about 25 head of cattle per annum were turned off grossing about

$5,000 per annum. The activity was not making any profit but was breaking even.

By way of comparison with the appellant Kosik's activities, I agree with the submissions made by the Chief Executive that the Whackett grazing activities are more advanced than those carried out on the subject aggregation during the relevant period, notwithstanding the leasing of part of the land in the aggregation for $7,200 per annum, and Mr Kosik's evidence that he is building up his herd. But this is negated to some extent by the evidence of the closing stock numbers in the financial year ending 30 June 1996, of only 31 head of cattle. Further, Mr Kosik says that the activities were not profitable during the relevant period and certainly, on my understanding of the evidence, not profitable during the financial year ending 30 June 1996, when a heavy loss ($38,337) was sustained. The grazing activities are sufficient to meet tests Nos 1 and 2 in Thomason but certainly fail test No 3. If Mr Kosik's hopes for the future become a reality, it well may be, if the subject land can carry 70 head of cattle when it is further developed and if the aggregation can run, say, 150 to 200 head of cattle in the future, then the subject land may qualify for it to be valued under s.17(1). But that is for the future. On the evidence before the Court in this case, and on the judgment of the Land Appeal Court in Whackett, I cannot hold that the provisions of s.17(1) of the Valuation of Land Act insofar as they relate to a valuation of the subject land as land used for the purpose of farming are applicable.

It follows then that the land is to be valued as a rural homesite. I have already rejected the valuation of the land made by Mr Crane as "extra land" in the previous case (for reasons see the decision in V95-275). For the same reasons I again cannot be influenced by his valuation in this case.

The valuation made by the Chief Executive as a rural homesite is supported by the traditional method of the use of sales evidence. Although I have some doubt that Mr Van Hees' Sale No 2 (to the appellants) is a suitable basis of valuation due to its adjoining owner influence factor and the circumstances surrounding the sale, there is simply no other sales evidence before the Court as Mr Crane did not refer in evidence to any sales as a basis for his valuation of $65,000 as “extra land”.

In these circumstances, I must prefer the Chief Executive's valuation. But before proceeding to determination, I should comment that no evidence was led in respect of Grounds 3 and 4 as contained within the notice of appeal.

It follows then that, the appeal is dismissed and that the valuation of Lot 313 on Plan W312356, Parish of Boyd, in the sum of $137,500 as determined by the respondent Chief Executive be affirmed.

CH Carter Member of the Land Court